Amy Remeikis

A senior analyst with the Commonwealth Bank’s insurance arm has accused some cancer patients of “taking advantage” of life insurance by setting up policies soon before they die.

Speaking at an Association of Superannuation Funds of Australia luncheon in Brisbane last week, Annette Torrington, a senior product manager with CommInsure, a subsidiary of the Commonwealth Bank, left some attendees “appalled” over some of the examples used to make her points.

Talking to about 200 Queensland super fund and insurance representatives about challenges faced by the industry, Ms Torrington was said to have spoken about cancer patients taking advantage of generous policy conditions by taking out life insurance policies which did not rely on medical checks before dying.

Another client with mental health issues was said to have made a career out of claiming from his income protection policies.

Advertisement

Media representatives for Commonwealth repeatedly told Fairfax Media Ms Torrington’s comments had been “taken out of context” but refused to elaborate.

Ms Torrington spoke about the automatic acceptance level, a policy measure which sets a maximum level of insurable cover available without a medical check.

An attendee told Fairfax Media Ms Torrington referred to CommInsure having to payout “to more than 30 cancer patients, over the last five years, who 'took advantage' of the insurance arrangements and then ‘died within six months of joining the fund’.”

“There were a number of people who drew breath in surprise,” the attendee said. "You could see it in their face. There was just shock."

“When she spoke about the cancer cases, she said, point blank, these members were taking advantage of their insurance policy, with no thought of what the member was going through.

“We work in the industry so we know people do die, and we appreciate the importance of people having the right policy. But to hear from someone who really is an industry leader describe it in those terms, it was appalling.

“She also used an example of someone with mental illness making multiple claims, and basically made a joke of how they had ‘made a career out of claiming’, basically saying that someone with mental illness actually chased insurance claims for a living.

“The overall point was the insurance industry needs a shake up because customers were taking advantage – no mention that there were loop holes in the policy which was on the insurance side.”

Another attendee also said he was shocked.

“There were audible gasps when she gave the cancer example” he said.

“She was talking about how super funds basically went crazy by offering high levels of insurance without doing the responsible ‘under writing’ and now that people have insurance they are using it, which is costing heaps and we need to wind it back.

“Which is fine, but to use the example she used, that went too far in my opinion. Fix the policy, don’t blame clients who are making legitimate claims.”

However another attendee, who also didn’t want to give their name, given the small size of the Queensland industry, said there was “nothing raised which we haven’t talked about within the industry”.

“There will always be someone trying to take advantage,” he said.

“There have been hard times and the market has changed and from that point of view there was nothing untoward in what she was saying. Nothing that shocked me.”

The latest Australian Prudential Regulation Authority report into life insurance policies recorded a net profit of $2 billion for the industry in the year to March 2014, a 34.7 per cent decrease from the previous year’s profit of $3 billion. But the March 2014 quarter profit of $672 million saw a 40.2 per cent improvement on the previous quarter.

CommInsure generated $716 million in income for the Commonwealth Bank last year, a 4 per cent increase on its previous return.

72 comments so far

I would say the reverse is far more worse. The insurance industry is taking advantage of its client.

Sc**w it, the insurance industry and the government in the bed to take advantage of the people. Not many industry/service has an enforced purchase clause with financial penalty.

And like what we have learnt from Queensland flood, most insurers would play the silly game with wording (e.g. water damage, flood water, backflow water, rain water) to avoid paying out. Certainly when you sign up the policy they will tell you it's the best policy on earth.

Commenter

Insurance

Location

for insurer

Date and time

July 30, 2014, 7:54AM

I took out income protection and life insurance with CommInsure in about 2004 and the C'Wealth representative was PROMOTING the fact that no health checks were required - using it as a selling point.

Commenter

mytwobobsworth

Date and time

July 30, 2014, 10:10AM

Just how is the insurance industry taking advantage of its clients? You make a statement but do not provide any evidence to back it up.

Financial review June 2013 ….. “AMP will have experienced losses of $38 million in the six months to June and another $26 million in the second half”.

It is a similar story across the industry; insurers are payout out more in claims than is coming in in premiums.

It this is how the industry “takes advantage” of the client then I am all for it.

Commenter

Darryl Melbourne

Date and time

July 30, 2014, 10:18AM

darryl, I will tell how they take advantage of clients.

They call cancer patients NON-STOP trying to push them to join insurance plans. They call cancer patients NON-STOP when they KNOW these patients are having chemotherapy treatment and when these patients are at an extreme vulnerable period of their life.

That's how, darryl!!!

Commenter

Sharron

Location

Canberra

Date and time

July 30, 2014, 11:41AM

Sharron, this happens only in your mind.

Commenter

Darryl Melbourne

Date and time

July 30, 2014, 12:14PM

I'll tell you how, Darryl.A friend of mine was sitting in a car with his parents, stopped at a set of lights. A car came through the intersection (DUI P plate driver) and slammed into them, seriously injuring my friend. It took the insurance company 6 years to pay out the claim. They tried to pin things on his father (the driver), the car (roadworthiness), the cost of treatment (because reconstructive surgery is so cheap!), etc. In the end, he had to take them to court, which of course the insurance company played out until the last minute, hoping to scare them off, before settling out of court the morning of the hearing.While I'm sure this is not typical, it is certainly a real example to answer your question.

Commenter

NewsHound

Location

Work

Date and time

July 30, 2014, 12:15PM

I am talking about the industry in general. The flood claim was just one of the example.

And I am not against AMP shareholders. However, if AMP has an inferior revenue structure, it is their issue. The last time I dealt with AMP in insurance, the conclusion was that only the ignorant would use them. Basically, I made a call to the ‘kind financial advisor’ of my super account to inquire about the insurances. He worked days and nights to send me a default PDS of the insurance policy. Lucky for me, I did read the PDS. The hidden clause was that the financial advisor would get a perpetual slice of insurance commission of up to 50%. I could understand that AMP might be very desperate for market share. However, I would say not all their losses could be attributed directly to insurance payout.

For more general statistic, go check out how much the private health insurance has taken (about 40%) and how much the private health sector has contributed (less than 10%) to the heath sector. Our government is basically asking (using medicare surcharge) everyone to contribute to insurers’ pocket. Essentially the private health sector can cover most of their cost using medicare rebate and then taking the premium as profit.

I am not against them making profit. But if they make it thru reaonable approach (e.g. AMP basically told me to hand over money to the financial advisor as the policy must be sold thru an advisor), contribute reasonable amount back into the sector, then I wouldn’t be so harsh.

Lastly, I am sorry for others who were/are in the unfortunate positions. Relatively speaking I am not really hurt by them. I am just talking from a statistical and financial point of view.

Commenter

Insurance

Location

for insurer

Date and time

July 30, 2014, 12:36PM

1. There is a large difference between general insurance (car/home etc.) and life insurance (life, trauma, income protection etc.) as life insurance is generally very long term in nature while general insurance is short term but more volatile.2. Currently Australian life insurance market is performing very badly with a number of insurers making losses, which means the premiums charged to the policyholders are not enough to cover claims, expenses etc. hence i'm not sure how you could argue that insurers are taking advantage of the clients.3. It's a zero sum game at the end of the day - the more policyholders take advantage of the insurance cover means every other policyholders will need to pay more unfortunately, as insurance is not a "free" product. Insurers can certainly offer even more generous cover but it means the price is much more expensive.

Commenter

Life Insurance

Location

Sydney

Date and time

July 30, 2014, 3:37PM

I'm no fan of insurance companies, but these examples strike me as somewhat odd.

Sharryn, how do the insurance companies know who has cancer?

Newshound, the state I am in has a no fault statutory body that provides insurance for anyone injured in an accident. Doesn't every state have this?

Commenter

vj

Date and time

July 30, 2014, 6:18PM

So basically if you make a claim on your insurance policy, you're "taking advantage" of it. Insurance companies won't be happy until they take everyone's money and pay out nothing.